Here's a misconception that costs homeowners real money: "I have a mortgage, so I should itemize." A decade ago, that was usually true. Today? About 91% of taxpayers take the standard deduction [1], and many homeowners are among them. The 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction, making it harder (not impossible) to beat. But a 2025 law just quadrupled the SALT cap from $10,000 to $40,000, which changes the math for millions of people in high-tax states.
30-Second Summary: You can either take the standard deduction (a fixed amount based on filing status) or itemize (add up qualifying expenses on Schedule A). Whichever number is bigger wins. For 2025, the standard deduction is $15,750 (single) and $31,500 (married). The SALT cap increase to $40,000 means more high-tax-state residents may benefit from itemizing in 2025.
The Basic Decision Framework
The rule is simple. You get one or the other, not both.
Standard deduction: A flat dollar amount. No receipts needed. No proof. Just subtract it from your AGI.
Itemized deductions: You list specific qualifying expenses on Schedule A. If that total is bigger than the standard deduction, you save more by itemizing.
| Filing Status | 2025 Standard Deduction |
|---|
| Single | $15,750 |
| Married Filing Jointly | $31,500 |
| Head of Household | $23,625 |
| Married Filing Separately | $15,750 |
Source: IRS [2]
That's your "number to beat." If your itemized deductions add up to more than the amount above for your filing status, itemize. If they don't, take the standard deduction. That's the entire decision.
Before the 2017 tax reform, about 31% of taxpayers itemized. Now it's under 10% [3]. The standard deduction got so large that most people can't accumulate enough qualifying expenses to exceed it.
What You Can Itemize
Not everything you spend money on counts. The IRS limits itemized deductions to specific categories:
State and Local Taxes (SALT)
You can deduct state income taxes (or state sales taxes, but not both) plus local property taxes. The combined deduction is capped at $40,000 for tax years 2025 through 2029 [4].
This cap was $10,000 from 2018 through 2024. The quadrupling is the single biggest change affecting the standard-vs-itemized calculation in years. If you live in Westchester County, northern New Jersey, the Bay Area, or any other high-tax area, this matters enormously.
A couple in Scarsdale paying $18,000 in property taxes and $12,000 in state income tax would have been capped at $10,000 total under the old rules. Now they can deduct the full $30,000.
Mortgage Interest
You can deduct interest on mortgage debt up to $750,000 (for loans taken out after December 15, 2017) [5]. Older mortgages use the previous $1,000,000 limit.
On a $400,000 mortgage at 6.5%, you'd pay roughly $25,700 in interest the first year. That's a substantial itemized deduction by itself.
Charitable Contributions
Cash donations to qualified 501(c)(3) organizations are deductible up to 60% of your AGI. Donated stock or other property has a lower limit (typically 30%) [6]. For a deeper dive, see our guide on charitable donation deductions.
Medical Expenses
Only the amount exceeding 7.5% of your AGI counts. If your AGI is $80,000, you need more than $6,000 in unreimbursed medical expenses before a single dollar becomes deductible [7]. Learn more about the medical expense deduction threshold.
Other Itemized Deductions
Casualty and theft losses from federally declared disasters. Gambling losses (up to your gambling winnings). That's about it for most people. The 2017 law eliminated the miscellaneous itemized deduction that used to cover things like tax prep fees and unreimbursed employee expenses.
A Worked Example: When Itemizing Wins
Meet Jason and Megan, married filing jointly, living in a suburb of San Jose, California. Combined AGI: $140,000.
| Deduction Category | Their Amount | Notes |
|---|
| Property taxes | $12,000 | |
| California state income tax | $9,000 | |
| Total SALT | $21,000 | Under the new $40k cap; fully deductible |
| Mortgage interest | $23,500 | $400,000 balance at 6.0% |
| Charitable contributions | $2,500 | Cash to local food bank and church |
| Medical expenses | $500 | $11,000 total, minus 7.5% AGI floor ($10,500) |
| Total Itemized | $47,500 | |
| Standard Deduction | $31,500 | |
Winner: Itemize. Their itemized deductions exceed the standard deduction by $16,000. At a 22% marginal tax rate, that's approximately $3,520 in tax savings compared to taking the standard deduction [4].
Under the old $10,000 SALT cap, their itemized total would have been $36,500 ($10k SALT + $23.5k mortgage + $2.5k charity + $500 medical). They still would have itemized, but the margin was much thinner. The new $40,000 SALT cap gave them an additional $11,000 in deductions.
A Worked Example: When the Standard Deduction Wins
Now meet Chris, single, renting an apartment in Dallas. AGI: $68,000.
| Deduction Category | Amount |
|---|
| Texas state income tax | $0 (Texas has none) |
| Property taxes | $0 (renter) |
| Mortgage interest | $0 (renter) |
| Charitable contributions | $1,200 |
| Medical expenses | $0 above threshold |
| Total Itemized | $1,200 |
| Standard Deduction | $15,750 |
Not even close. Chris takes the standard deduction. And honestly, most renters in no-income-tax states will find themselves here. Without mortgage interest and state income tax, it's nearly impossible to reach $15,750 in itemized deductions.
The Bunching Strategy
Here's where this gets strategic. If your itemized deductions are close to (but slightly under) the standard deduction, you're in no-man's-land. You take the standard deduction, and your charitable giving generates zero tax benefit.
The solution: bunching. Concentrate two or three years of charitable donations into a single tax year. Itemize that year, and take the standard deduction in the off years.
A married couple who donates $8,000 annually to charity:
| Year | Donation | Other Itemized | Total Itemized | Better Option |
|---|
| Normal: Year 1 | $8,000 | $25,000 | $33,000 | Itemize |
| Normal: Year 2 | $8,000 | $25,000 | $33,000 | Itemize |
| 2-Year Total | | | $66,000 | |
| Year | Donation | Other Itemized | Total Itemized | Better Option |
|---|
| Bunched: Year 1 | $16,000 | $25,000 | $41,000 | Itemize |
| Bunched: Year 2 | $0 | $25,000 | $25,000 | Standard ($32,200 in 2026) |
| 2-Year Total | | | $73,200 | |
By bunching, they gain $7,200 in total deductions over two years with the same charitable outlay. A Donor-Advised Fund at Fidelity Charitable or Schwab Charitable makes this easy: contribute the lump sum, take the deduction, then distribute grants to your charities over time.
The Married-Filing-Separately Trap
A rule that catches people every year: if one spouse itemizes, the other must also itemize [8]. You can't mix and match.
This creates problems for some couples. Suppose one spouse has a business with large deductible expenses, making itemizing beneficial. The other spouse has no itemizable expenses at all. Too bad. They both itemize, or they both take the standard deduction.
In most cases, filing jointly and taking the combined standard deduction ($31,500) beats the complexity of filing separately and having one spouse stuck with minimal itemized deductions.
Can You Switch Every Year?
Absolutely. There's no lock-in. Take the standard deduction this year, itemize next year, switch back the year after. The IRS doesn't care about consistency. They care about which box you check [8].
This flexibility is exactly what makes bunching work. You're not committing to a lifelong strategy. You're optimizing year by year.
Your Next Move
- Run the comparison. Add up your SALT (now capped at $40k), mortgage interest, charitable giving, and medical expenses above 7.5% of AGI. Is the total higher than your standard deduction? If yes, itemize.
- Check the new SALT cap. If you live in a high-tax state and were previously capped at $10,000, recalculate. The jump to $40,000 may flip your decision.
- Consider bunching charitable donations. If you're close to the threshold, consolidate giving into alternating years. Open a Donor-Advised Fund to make it seamless.
- Use our tax refund calculator to model both scenarios with your actual numbers.
- Don't default to habit. If you've always itemized or always taken the standard deduction, re-examine every year. The tax law changed in 2017 and again in 2025. Your deductions should adapt.
For more detail on current standard deduction amounts, including the extra amounts for seniors, see our comprehensive guide. And if you're comparing retirement account types and wondering how contributions affect your AGI (and therefore your itemizing math), that's worth exploring too.
References
- USAFacts. (2026). Standard Deduction vs. Itemized Deduction: Definition & Usage Trends. https://usafacts.org/articles/standard-deduction-vs-itemized-deduction-definition
- Tax Foundation. (2025). 2025 Tax Brackets. https://taxfoundation.org/data/all/federal/2025-tax-brackets/
- Tax Policy Center. (2025). What are Itemized Deductions and Who Claims Them? https://taxpolicycenter.org/briefing-book/what-are-itemized-deductions-and-who-claims-them
- Thomson Reuters. (2025). SALT Deduction Glossary & Updates. https://tax.thomsonreuters.com/en/glossary/salt-deduction
- NerdWallet. (2025). Mortgage Interest Rate Deduction. https://www.nerdwallet.com/taxes/learn/mortgage-interest-rate-deduction
- The Signatry. (2025). 2025 Charitable Contribution Limit. https://thesignatry.com/blog/2025-charitable-contribution-limit/
- Internal Revenue Service. (2025). Deductions for Individuals. IRS Newsroom. https://www.irs.gov/newsroom/deductions-for-individuals-the-difference-between-standard-and-itemized-deductions-and-what-they-mean
- Fidelity. (2026). Itemized Deductions vs. Standard Deduction. https://www.fidelity.com/learning-center/smart-money/itemized-deductions
